Attributional tendencies in cultural explanations of M&A performance

By: Eero Vaara, Paulina Junni, Riikka M. Sarala, Mats Ehrnrooth, Alexei Koveshnikov

This is the accepted version of the following article:

Vaara, E., Junni, P., Sarala, R. M., Ehrnrooth, M. and Koveshnikov, A. (2014), Attributional

tendencies in cultural explanations of M&A performance. Strategic Management Journal,

35(9), 1302–1317. doi: 10.1002/smj.2163,

which has been published in final form at http://dx.doi.org/10.1002/smj.2163.

***©Wiley. Reprinted with permission. No further reproduction is authorized without

written permission from Wiley. This version of the document is not the version of record.

Figures and/or pictures may be missing from this format of the document. ***

Abstract:

This paper focuses on managers' attributions of M&A performance. Our analysis indicates that

there is a linear association between performance and attributions to cultural differences, which

is moderated by prior experience. Furthermore, our results suggest that there is a curvilinear

association between performance and attributions to managers' actions, but we found no support

for the moderating effect of experience for this association. By substantiating these attributional

tendencies, our results contribute to research on M&As and studies on attribution more

generally. In particular, our study helps to put cultural differences in perspective and cautions

researchers and practitioners alike to avoid simplistic explanations of M&A performance.

Keywords: merger | acquisition | culture | attribution | integration

Article:

INTRODUCTION

One of the key debates in research on mergers and acquisitions (M&A) focuses on the role of

cultural differences. Scholars have examined the impact of organizational cultural differences on

M&A performance (Chatterjee et al., 1992; Stahl, Mendenhall, and Weber, 2005; Stahl and

Voigt, 2008) and, in international settings, the impact of national cultural differences (Calori,

Lubatkin, and Very, 1994; Chakrabarti, Gupta-Mukherjee, and Jayaraman, 2009; Morosini,

Shane, and Singh, 1998; Reus and Lamont, 2009; Weber, Shenkar, and Raveh, 1996). Most of

this research tells the same story; cultural differences tend to have a negative impact on

performance. Although some of the researchers found a positive impact (Morosini et al., 1998)

or argued that cultural differences may provide both sources of value creation and obstacles to

integration (Björkman, Stahl, and Vaara, 2007), the fact remains that cultural differences are

usually associated by researchers and practitioners alike with disappointment and failure.

http://libres.uncg.edu/ir/uncg/clist.aspx?id=3981http://dx.doi.org/10.1002/smj.2163

In this paper, we want to add to this discussion by elucidating the attributional tendencies related

to cultural differences and M&A performance. In a nutshell, we focus on the way in which

success or failure is attributed to the actions of managers or to cultural differences. This is an

important issue for several reasons. Cultural differences may serve as convenient targets for

attribution—“easy explanations”—compared with other more complex causes of success. Thus,

the focus on cultural differences alone can unduly simplify the ways in which we conceptualize

the factors that explain success or failure (King et al., 2004). Moreover, attributions to cultural

differences can be (mis)used as political tools for self-serving purposes. In particular, managers

may be tempted to reduce their own responsibility for failure by “blaming” cultural differences;

the opposite tendency can be expected in successful cases (Vaara, 2002). Methodologically, such

attributional tendencies may create biases in research with significant implications for our

knowledge of M&As (Stahl and Voigt, 2008; Teerikangas and Very, 2006).

To better understand these tendencies, we draw on attribution theory (Heider, 1958;

Kelley, 1967; Weiner, 1979). Attribution theory provides a useful theoretical basis for analysis of

explanations of success and failure, and it has also been applied in management studies (Bettman

and Weitz, 1983; Hayward, 2002; Hayward and Shimizu, 2006; Martinko, Harvey, and

Dasborough, 2011; Nishii, Lepak, and Schneider, 2008). With a few exceptions (Billett and

Qian, 2008; Vaara, 2002), research on M&As has, however, focused little attention on

attributions. In particular, there is scant systematic evidence of the attributional tendencies

associated with cultural differences.

This leads us to formulate our research question as follows: Do managers' explanations of M&A

performance reflect biases toward cultural differences and/or their own actions? In line with

attribution theory, we first examine whether perceptions of failure lead to increasing attributions

to cultural differences and whether perceptions of success increase attributions to management's

actions. We then examine whether these tendencies could be curvilinear instead of linear, which

would reflect biases in cases of both extreme success and failure. Finally, we focus on the

question of whether the experience of previous M&As strengthens these tendencies.

ATTRIBUTION THEORY AND HYPOTHESIS DEVELOPMENT

The relationship between performance and causal attributions

Attribution theory aims to understand causal explanations for specific events and phenomena

(Heider, 1958; Kelley, 1967; Reisenzein and Rudolph, 2008; Weiner, 1979, 2008). It postulates

that people have an ingrained need to understand and control their environments and thus try to

develop causal explanations for significant events. The theory argues for a general tendency to

attribute success to internal causes (people's own actions or abilities, i.e., causes controlled by

the individual) and, correspondingly, a tendency to explain failure by reference to external

causes (i.e., causes over which the individual has little control) (Heider, 1958; Kelley, 1971).

There are two explanations for such attribution biases. First, the psychological explanation states

that organizational actors make causal attributions in order to protect their self-esteem, to

maintain their sense of mastery over their environment, and to reduce cognitive dissonance

(Bettman and Weitz, 1983; Staw, McKechnie, and Puffer, 1983). Second, the political

explanation suggests that causal attributions are also utilized to enhance the esteem of actors by

projecting a favorable self-image to others. For example, executives tend to take credit for

corporate performance and blame outside events in the event of failure (Bettman and

Weitz, 1983; Salancik and Meindl,1984). Similarly, board members tend to be divided on the

basis of whether they are inside or outside board members; the former tend to attribute

responsibility for negative performance to industry and market conditions, whereas the latter

attribute it to top management (Schaffer, 2002).

Management and organizational scholars have used attribution theory in various types of studies

(Bettman and Weitz, 1983; Hayward, 2002; Hayward and Shimizu, 2006; Jordan and

Audia, 2012; Mantere et al., 2013; Nishii et al., 2008). However, a recent review makes the point

that this theory is still underutilized considering its potential and ability to explain important

sociopsychological phenomena (Martinkoet al., 2011). We argue that this is especially true in

research on M&As. While attributions have received little attention in studies of M&As, a few

studies nevertheless provide interesting insights into attributions in general and attributions to

cultural differences in particular. Hayward and Shimizu (2006) showed that managers are more

likely to admit failure and divest a target unit when they can do so without incriminating

themselves. Billett and Qian (2008) provided evidence of self-attribution biases and

overconfidence in M&As. Their analysis suggested that if managers experienced success in prior

M&As, they attributed it to their own ability even when it was due to chance; this made them

overconfident, and could eventually result in negative outcomes in subsequent deals.

Furthermore, Vaara (2002) demonstrated that managers use a number of discursive strategies to

deal with the sociopsychological pressures related to success and/or failure; these include

tendencies to attribute success to one's own actions and failure to cultural differences.

Hence, although there are good reasons for expecting that the attributions by managers of

success and failure in M&As are likely to reflect attributional biases, these tendencies need to be

tested in a systematic way. Accordingly, we first propose that managers emphasize the

importance of their own actions in successful cases and in turn downplay them in cases of

failure. Our first hypothesis, therefore, states the following:

Hypothesis 1a: M&A performance is positively associated with causal attributions to managerial

agency.

Second, we expect that managers attribute failure to cultural differences. We thus formulate our

second hypothesis as follows:

Hypothesis 2a: M&A performance is negatively associated with causal attributions to cultural

differences.

While attribution research has emphasized the use of self-serving attributions to avert blame and

to enhance self-confidence, recent studies have questioned the pervasiveness of self-serving

attributions (Hodkins and Liebeskind, 2003; Lee and Robinson, 2000; Lee and Tiedens, 2001;

Schlenker, Pontari, and Christopher, 2001; Tomlinson, Dineen, and Lewicki, 2004). For

instance, in their study of managers' accounts of negative outcomes (a hypothetical salary

freeze), Lee and Robinson (2000) found that managers made more internal causal attributions to

factors that were under their control (subject to their own effort and behavior) than to external

factors that were not under their control (the situation). They argued that, in an organizational

setting, individuals have multiple motivations that impact causal attributions. On the one hand,

individuals are motivated to avert blame and to bolster their self-esteem in cases of failure. On

the other hand, they also wish to project a sense of power and control. Attributing failure to

internal rather than external factors bestows individuals with a sense of control over the situation,

and reduces feelings of helplessness (Homsma et al., 2007). The need to project a sense of being

in control to oneself and to others rather than one of being powerless can lead managers in cases

of failure to make internal attributions to indicate that they can take charge of the situation and

intervene in the future to improve the negative situation (Lee and Robinson, 2000; Lee and

Tiedens, 2001). In contrast, external self-serving attributions can make the account-givers seem

“deceptive, self-absorbed, and ineffectual; they are viewed as unreliable social participants with

flawed character” (Schlenker et al., 2001: 15).

These researchers have also reflected upon whether the nature of self-serving attributions is

dependent on positions of different status (Lee, 1997; Lee and Robinson, 2000; Lee and

Tiedens, 2001). More specifically, for actors in high-status roles the motivation to appear

powerful and in control can be more salient than the need to avert blame, making them more

likely to attribute failure to internal causes (Lee, 1997; Lee and Robinson, 2000; Lee and

Tiedens, 2001). Hence, managers, knowing that their actions will be evaluated and assessed, may

assume greater responsibility for extremely unsuccessful acquisitions. We suggest that the

tendency to assume responsibility for failure will be strongest in extreme cases of significant

underperformance, because in these situations the need of managers to project that they are in

control and can take corrective action is strongest. In this situation, self-serving (external)

attributions, for example, to cultural differences, are also more likely to be the subject of critical

examination (Lee and Robinson, 2000), thereby posing the risk that managers will be perceived

as powerless or ineffectual. Hence, we propose the following curvilinearity hypotheses. These

represent competing hypotheses for the linear Hypotheses 1a and 2a presented earlier.

Hypothesis 1b: There will be a U-shaped curvilinear relationship between managerial

attributions of M&A performance to managerial actions such that attributions to managerial

agency are highest at extremely high and low levels of performance.

Hypothesis 2b: There will be an inverse U-shaped curvilinear relationship between managerial

attributions of M&A performance to cultural differences such that attributions to cultural

differences are lowest at extremely high and low levels of performance.

The moderating impact of acquisition experience

If and when these attributional tendencies characterize managers' explanations of success and

failure—either linearly (Hypotheses 1a and 2a) or curvilinearly (Hypotheses 1b and 2b) as

suggested in the above hypotheses—it is important to examine whether prior experience impacts

these associations. Although experience can help to provide more nuanced explanations of

success and failure and thus in principle mitigate biases, insights from attribution research

suggest that the attributional tendencies may actually strengthen with experience as people learn

to explain success and failure in particular ways.

Studies indicate that attributions of success by individuals to their own ability tend to increase

over time (Bandura, 1997; Schunk, 1994; Weiner, 1992). In particular, prior attributions of

success to internal factors, such as skills and abilities, have been found to increase

overconfidence (Duncan and McAuley, 1993; Schunk and Gunn, 1986; Weiner, 1992). For

example, in educational research, it was found that students' attributions of performance tended

to become more personally flattering and comforting as the school semester progressed (Arkin,

Detchon, and Maruyama, 1981). Similarly, it was shown in finance that when analysts and

managers experienced initial success, they tended to become overconfident in their subsequent

entry and investment choices (Camerer and Lovallo, 1999; Hilary and Menzly,2006; Malmendier

and Tate, 2005, 2008). In the M&A context, Billett and Qian (2008) found evidence indicating

that managers with greater acquisition experience were more likely to attribute M&A success to

internal factors, which increased their self-attribution biases and caused them to become

overconfident. This line of reasoning is also supported by studies of learning in organization

studies. In particular, March and Sutton (1997) argued that managers who make it to the top are

likely to be biased about their experiences of success; this leads them to be overconfident about

the impact of their own actions. As managers involved in M&As are usually top managers, they

may be individuals who are especially likely to attribute success to internal causes; i.e., to

explain successful acquisition with their own managerial action.

Concerning external attributions, attributions of poor performance to external factors may also

increase with experience. This is in line with attribution theory, according to which experience

increases an individual's awareness about external factors that can potentially impact

performance, thereby making these external factors more salient (Kelley, 1973). Accordingly,

Smither et al. (1986) argued that as experience increases, actors develop an appreciation for the

difficulties in the external environment and as a result make more external attributions; however,

their results did not support this hypothesis. Mitchell and Kalb (1982) found that experience

increased the tendency of supervisors to attribute failure to external factors (the work

environment) because it made the impact of the work environment more salient to the

supervisors. Furthermore, managers who experience repeated failures are likely to become

increasingly defensive and make more external performance attributions in order to protect their

self-esteem and persuade themselves that they should not be blamed (Brown, 1984). Building on

the reasoning above, it can be expected that, in cases of poor M&A performance, managers with

greater acquisition experience will be more likely to attribute failure to external factors because

these factors are more salient to them and because external attributions protect their personal

self-esteem and public image. Hence, we propose that managers with experience will be even

more likely to attribute successes to their own actions and failure to cultural differences.

Hypothesis 3a: A positive linear association between M&A performance and causal attributions

to managerial agency will be stronger in acquisitions where the managers have greater prior

experience.

Hypothesis 4a: A negative linear association between M&A performance and causal attributions

to cultural differences will be stronger in acquisitions where the managers have greater prior

experience.

The above argumentation assumes a linear relationship between M&A performance and

attribution effects, in line with Hypotheses 1a and 2a. If the relationship is curvilinear, as

suggested in Hypotheses 1b and 2b, we would expect experience to moderate the curvilinear

relationship. We would still predict that, at a high level of performance, experience increases

attribution to managerial action and decreases attribution to cultural differences because

managers may become overconfident about their own influence (Billett and Qian,2008;

Malmendier and Tate, 2005, 2008). However, in contrast to the linear hypotheses, at a low level

of performance a curvilinear relationship would imply that attributions to manager's actions are

high and attributions to cultural differences are low as managers take responsibility for cases of

obvious failure in order to project a sense that they are responsible and in control (Lee, 1997; Lee

and Robinson,2000; Lee and Tiedens, 2001). Prior research has not explicitly addressed this

issue, but experience could accentuate this tendency as managers learn that they cannot escape

taking responsibility for obvious failure. Accordingly, we present the following hypotheses for

the possible moderating effect of experience in the case of the curvilinear relationship.

Hypothesis 3b: A positive curvilinear association between M&A performance and causal

attribution to managerial agency will be stronger in acquisitions where the managers have

greater prior experience.

Hypothesis 4b: A negative curvilinear association between M&A performance and causal

attribution to cultural differences will be stronger in acquisitions where the managers have

greater prior experience.

METHODOLOGY

Sample and data collection

Our sample consists of Finnish acquirers and includes domestic and cross-border mergers based

on a database maintained by the Finnish business magazine Talouselämä between 2001 and

2004. Mergers were included only if the acquiring firm gained a controlling interest in the

acquired firm and the acquired firm was valued at EUR 3 million or more. In order to obtain high

quality responses, acquiring firm CEOs were contacted via telephone and asked to identify

potential respondents who were involved at the time in the acquisition and were knowledgeable

about it. Then a survey was mailed to the CEOs, who distributed it to the respondents that had

been identified in the acquiring and acquired firms. The respondents included CEOs (42.7%), top

managers (42.7%), and other members of the management group and board members (14.6%).

The overall response rate was 20 percent, yielding a sample of 92 mergers (51 domestic and 41

cross-border acquisitions in 22 countries). The cross-border acquisitions included the following

countries: Austria, Belgium, Canada, China, the Czech Republic, Estonia, France, Germany,

Great Britain, Hong Kong, Italy, Latvia, Lithuania, Norway, the Netherlands, Poland, Russia,

Spain, Sweden, Switzerland, and the United States. Ten firms returned responses from multiple

respondents. Based on the cases from which we received multiple answers, the interrater

reliability was checked, yielding significant intraclass correlation scores for most cases

(p 

independent variables. Because these relationships are unlikely to be part of the respondents'

mental models, concerns regarding the existence of common method bias should be alleviated

(Chang, Witteloostuijn, and Eden, 2010).

Measures

Independent variable

Acquisition performance

This variable consisted of four items that measured the outcome of the acquisition and the

integration process. In line with prior studies of M&As, we used managerial evaluations of

acquisition performance (Birkinshaw et al., 2000; Datta, 1991; Very, Lubatkin, and Calori, 1996;

Very et al., 1997). This approach is in line with the essence of attribution research where

perceptions rather than, for example, “objective” assessments are the core of attributional

analyses (Heider, 1958; Weiner, 2008). First, respondents were asked to indicate how well the

(1) acquisition, and (2) integration process had succeeded. Second, respondents were asked how

the (1) acquisition, and (2) integration process had succeeded compared with expectations. The

scale ranged from 1 = total failure to 7 = great success.

To examine any consistent bias between objective and subjective performance measures, we

collected objective performance data. Financial statements were available for 43 publicly listed

companies, which represented 47.8 percent of our sample. Objective performance, measured as

the acquirer's ROI after the acquisition (in 2005), correlated positively and significantly with our

subjective acquisition performance measure. Also, the objective performance measure was

significantly correlated in the expected direction (negatively) with the measure “attribution to

cultural differences” and (positively) with “attribution to managers” actions' (Hypotheses 1a and

2a). This provides further validity for our subjective performance measure.

Moderating variable

Personal acquisition experience

We measured personal acquisition experience by combining the number of acquisitions in which

the respondent had been personally involved (1) on the acquiring firm side, and (2) on the

acquired firm side. This sum index represented the person's combined prior experience of

acquisitions.

Dependent variables

Attribution to managers' actions

We followed the example of previous studies in measuring attributions based on the respondents'

perceptions (De Michele et al., 1998; Duval and Silvia, 2002; Greenlees et al., 2007; Harvey and

Martinko, 2009; Schaffer, 2002). Regarding attribution to managers' actions, we therefore asked

respondents to rate their perceptions based on the extent to which management's actions (1) had

affected the outcome of the integration process, and (2) explained the overall success of the

acquisition. The scale ranged from 1 = not at all to 7 = a great deal.

Attribution to cultural differences

Following this logic, we asked respondents about the extent to which they perceived that cultural

differences (1) had affected the outcome of the acquisition's integration process, and (2)

explained the overall success of the acquisition. The scale ranged from 1 = not at all to 7 = a

great deal.

Control variables

Organizational cultural differences

To control for the effect of actual cultural differences on the attributions, we included both

organizational and national cultural differences in our models. Following the example of

previous studies (Chatterjee et al., 1992; Weber et al., 1996), we asked managers to report

organizational cultural differences prior to the acquisition in the following areas: management

and control, sales and marketing, production, research and development, and company values in

general. The scale ranged from 1 = no differences to 7 = significant differences.

National cultural differences

We controlled for national cultural differences by building a construct of the variance-adjusted

sum of differences between the two acquisition parties (Kogut and Singh, 1988) based on the

nine dimensions of the GLOBE practices scores (House et al., 2004).1

Degree of integration

To control for the impact of managers' actions in postacquisition integration (Weber et al., 1996),

we asked respondents to assess the degree of integration between the acquirer and the target in

the following functions: management and control, sales and marketing, production, research and

development. The scale ranged from 1 = no integration to 7 = total integration.

Respondent involvement

The participation of a respondent in the acquisition and integration decisions may bias his/her

opinion of the acquisition outcome and the factors that contributed to it (Billett and Qian, 2008).

We controlled for this by measuring the respondent's involvement in the decision making leading

to the acquisition and in the integration of the companies. The scale ranged from 1 = not at all to

7 = yes, as a central decision maker.

Acquisition size

We included the size of the acquisition as a control variable in line with prior acquisition studies

(Haleblian and Finkelstein, 1999; Morosiniet al., 1998). Acquisition size was measured as the

target's net sales at the time it was acquired and was reported in the business magazine

Talouselämä.

Time elapsed

Acquisition dynamics can be influenced by the time elapsed since the acquisition. Following the

approach by Very et al. (1997), we measured the number of years that had passed after the

acquisition (one to four years). This external measure was based on the information in the

business magazine Talouselämä.

RESULTS

Pretests of the questions with professors and managers supported the face-validity of the

constructs. To further evaluate the reliability and validity of our items and constructs, we used

confirmatory factor analysis with partial least squares (PLS) analysis, which is a structural

equation modeling approach particularly applicable for smaller sample sizes. We followed the

instructions of Shook et al. (2004) for evaluating the results of the confirmatory factor analysis.

First, we examined the variable loadings, their t-values and corresponding significance levels (p-

values) and verified that all of them were significant (see Table 1). Then, we examined the

reliability of the constructs. Cronbach's alphas all exceeded the commonly used threshold of 0.7.

However, Cronbach's alphas have several limitations. Hence, following the recommendation of

Shook et al. (2004), we calculated the composite reliabilities for each construct, all of which

were above the limit of 0.7, with each indicator reliability above 0.5. To establish convergent

validity, we calculated the average variance extracted, which exceeded 50 percent (Shook et

al., 2004). The convergent validity was also supported by examination of an item-to-item

correlation table that showed that the items correlated highest with other items belonging to the

same construct. Discriminant validity was assured by calculating the shared variance between

each pair of constructs and confirming that it was lower than the square root of the average

variance extracted for each individual construct (Shook et al., 2004).

Table 1. Item factor loadings, indicator reliability, construct validity, and reliability

Construct Measurement

item

Factor

loading

Indicator

reliability

t-value Composite

reliability

Average

variance

Cronbach's

alpha

Acquisition

performance

Acquisition

outcome

0.868 0.753 20.779*** 0.952 0.831 0.933

Integration

outcome

0.918 0.843 49.319***

Success of the

acquisition

0.920 0.846 40.796***

compared with

expectations

Success of the

integration

compared with

expectations

0.940 0.883 55.336***

Attribution to

managers'

actions

Extent to which

managements'

actions affect

integration

0.928 0.861 23.315*** 0.925 0.861 0.839

Extent to which

managements'

actions explain

acquisition

success

0.928 0.861 26.958***

Attribution to

cultural

differences

Extent to which

cultural

differences affect

integration

0.929 0.863 14.826*** 0.885 0.794 0.747

Extent to which

cultural

differences

explain

acquisition

success

0.852 0.726 7.700***

Organizational

cultural

differences

Management and

control

0.861 0.742 4.314*** 0.894 0.629 0.859

Sales and

marketing

0.808 0.652 4.195***

Production 0.741 0.549 3.435***

Research and

development

0.737 0.543 3.050***

Company values

in general

0.811 0.658 4.690***

Degree of

integration

Management and

control

0.819 0.671 9.738*** 0.938 0.792 0.912

Sales and 0.889 0.790 10.314***

marketing

Production 0.925 0.855 10.888***

Research and

development

0.922 0.849 12.373***

Participation Preacquisition

stage

0.882 0.778 8.942*** 0.890 0.802 0.755

Postacquisition

stage

0.909 0.826 15.458***

*** p 

integra

tion

6.

Organi

zation

al

cultura

l

differe

nces

1.

00

0

7.00

0

4.8

17

0.1

43

−0.

088

−0.

10

0

0.1

61

−0.1

23

−0.0

15

1

7.

Nation

al

cultura

l

differe

nces

0.

00

0

18.8

53

2.8

13

0.5

26

0.1

70

0.0

69

−0.

181

0.04

1

−0.0

99

−0.

031

1

8.

Perfor

mance

1.

00

0

7.00

0

5.2

24

0.1

36

−0.

110

−0.

00

5

−0.

006

0.23

2*

0.34

9**

−0.

267

*

−0.

08

1

1

9.

Attrib

ution

to

manag

ers'

actions

1.

00

0

7.00

0

3.7

14

0.1

48

0.0

22

−0.

09

3

0.2

07

−0.0

28

−0.0

85

0.1

81

−0.

15

2

−0.3

15**

1

10.

Attrib

ution

to

cultura

l

differe

nces

3.

00

0

7.00

0

5.6

10

0.0

97

−0.

228

*

0.0

11

0.2

74*

*

0.01

4

0.26

1*

0.1

20

−0.

16

9

0.29

2**

0.0

65

1

11.

Square

d

perfor

mance

1.

00

0

49.0

00

28.

878

1.2

84

−0.

109

−0.

04

7

0.0

87

0.03

9

−0.2

70*

*

0.1

00

−0.

04

4

−0.5

51**

*

0.1

47

0.1

36

1

12.

Perfor

mance

0.

00

490.

000

38.

702

8.7

95

−0.

032

0.1

13

0.0

81

0.86

3**

−0.0

41

−0.

093

−0.

01

0.03

1

−0.

05

−0.

01

0.1

79

1

×

acquisi

tion

experi

ence

0 * 8 3 4

13.

Square

d

perfor

mance

×

acquisi

tion

experi

ence

0.

00

0

343

0.00

0

237

.58

4

60.

34

0

0.0

15

0.0

87

−0.

005

0.89

3**

*

0.02

9

−0.

207

0.0

25

0.32

1**

−0.

07

2

−0.

01

8

−0.

08

3

0.86

3**

*

1

All two-tailed tests. N = 90, missing values were replaced with mean. Pearson's bivariate

correlations in the table represent standardized beta coefficients. *p 

Curvilinear model:

attribution to

managers' actions

Curvilinear model:

attribution to cultural

differences

Curvilinear

moderation:

attribution to

managers' actions

Linear moderation:

attribution to cultural

differences

Variabl

es

Beta t Si

g.

VI

F

Beta t Si

g.

VI

F

Beta t Si

g.

VI

F

Beta t Si

g.

VI

F

Acquisit

ion size

−0.0

47

−0.

563

0.5

75

1.1

16

0.01

8

0.1

90

0.8

49

1.1

16

−0.0

49

−0.

582

0.5

62

1.1

18

0.00

5

0.0

58

0.9

54

1.0

86

Time

elapsed

0.07

0

0.8

62

0.3

91

1.0

61

−0.0

79

−0.

862

0.3

91

1.0

61

0.06

3

0.7

60

0.4

50

1.0

97

−0.0

92

−1.

025

0.3

08

1.0

61

Respon

dent

involve

ment

0.18

9*

2.0

40

0.0

45

1.0

87

0.16

9

1.6

16

0.1

10

1.0

87

0.18

5

1.9

83

0.0

51

1.0

95

0.17

2

1.6

97

0.0

94

1.0

84

Acquisit

ion

experien

ce

−0.1

26

−1.

297

0.1

98

1.1

78

0.08

4

0.7

70

0.4

44

1.1

78

−0.0

35

−0.

162

0.8

72

5.8

21

0.50

2*

2.2

46

0.0

27

5.1

57

Degree

of

integrati

on

0.16

4

1.6

44

0.1

04

1.1

91

0.00

0

−0.

001

0.9

99

1.1

91

0.16

6

1.6

52

0.1

03

1.1

93

0.03

1

0.2

78

0.7

82

1.1

92

Organiz

ational

cultural

differen

ces

0.20

4

1.8

84

0.0

63

1.1

48

0.06

7

0.5

50

0.5

84

1.1

48

0.19

4

1.7

56

0.0

83

1.1

88

0.04

6

0.3

89

0.6

98

1.1

53

National

cultural

differen

ces

−0.0

57

−0.

428

0.6

69

1.0

80

−0.2

21

−1.

479

0.1

43

1.0

80

−0.0

58

−0.

439

0.6

62

1.0

81

−0.2

48

−1.

697

0.0

94

1.0

86

Perform

ance

0.54

7***

4.4

29

0.0

00

1.9

50

−0.3

77**

−2.

700

0.0

08

1.9

50

0.55

1***

4.4

26

0.0

00

1.9

56

−0.4

25**

−3.

464

0.0

01

1.5

82

Squared

perform

ance

0.29

9***

3.9

38

0.0

00

1.6

36

−0.0

64

−0.

745

0.4

59

1.6

36

0.29

3***

3.7

83

0.0

00

1.6

83

Squared

perform

ance ×

acquisiti

−0.0

70

−0.

469

0.6

40

5.7

94

on

experien

ce

Perform

ance ×

acquisiti

on

experien

ce

−0.4

25*

−2.

203

0.0

30

4.7

64

R2 0.35

7

0.18

2

0.35

9

0.22

4

Adjuste

d R2

0.28

5

0.09

0

0.27

8

0.13

6

R2 chan

ge

0.12

5

0.00

6

0.00

2

0.04

7

F 4.94

1***

1.40

9

4.42

5***

2.55

9*

All two-tailed tests. N = 90, missing values were replaced with mean. Data in the table represent

standardized beta coefficients. Dependent variables: attribution to managers' actions, attribution

to cultural differences. The results are robust to nested models. See the online supporting

information for the results of the simpler models. *p 

To test Hypothesis 4a, we added the interaction term performance × acquisition experience and

examined its relationship with attribution to cultural differences. The significant improvement in

the new model (“Linear Moderation” in Table 3) compared with the initial linear model (see

Table S1) (ΔR2 = 0.047, p 

performance and attributions to managers' actions. In other words, managers tend to attribute

extreme cases of both success and failure to their own actions. Thus, managers are likely to take

credit for success, which may among other things lead to an illusion of control or to

overconfidence. Such an illusion of control can be dangerous when managers confront the

complex challenges of M&A processes (Haspeslagh and Jemison, 1991) and may even partially

explain the willingness to engage in risky M&As and “merger frenzy” (Billett and Qian, 2008).

However, our curvilinear findings also suggest that managers do attribute extreme cases of

failure to their own actions. In such cases, managers may need to project a sense of control both

to themselves and others (Schlenker et al., 2001). The strength of managerial attributions was,

however, unaffected by experience.

By highlighting these attributional tendencies, our analysis has implications for the discussion

concerning the conceptualization and measurement of cultural differences (Ailon, 2008; Berry,

Guillén, and Zhou, 2010; Boyacigiller et al., 1996; Harzing, 2003; Shenkar, 2001,2012a,b). On

the one hand, our results point toward the importance of using and developing more objective

and comprehensive measures of cultural differences. For example, researchers can use

multisource and multilevel research designs where (prior) organizational cultures are measured

by groups of lower-level employees previously employed by the independent organizations. In

this case, employees' perceptions would be less likely to be biased due to factors related to their

prestige and/or self-esteem. Cultural differences could then be operationalized as differences

between the perceptions of these groups. The above could be complemented with analyzing

differences in perceptions between lower-level employees and higher-level managers. On the

other hand, our results caution researchers not to rely overly on any static measure of cultural

differences. In the worst case, the result may be myopia or, in other words, systematic

overestimation of the impact of culture on different organizational phenomena such as M&A,

FDI, and entry mode choice (Harzing, 2003). In light of this debate, our analysis provides

additional grounds for developing new kinds of conceptualizations of cultural dynamics. These

can include quantitative analyses of convergence or crossvergence in cultural differences (Sarala

and Vaara, 2010) or qualitative analyses of cultural identity formation (Clark et al., 2010;

Maguire and Phillips, 2008; Riad and Vaara, 2011; Vaara and Tienari, 2011).

Our findings also contribute to research on attributions more generally. Applying insights from

attribution theory to M&As is important per se—and consistent with the recent reviews of

attribution theory in management studies (Martinko et al., 2011). Furthermore, our findings

concerning the role of experience and curvilinear relationships may have broader implications

for research on attributions. While studies of attributions indicate that experience may strengthen

attributional tendencies, systematic analyses have been scarce. One interpretation of the results is

that experience may indeed imply learning of a specific kind, i.e., learning to use particular—in

our case, cultural—language to explain failure. It would be interesting to examine such

phenomena more closely in future studies; this could include analysis of whether and how

previous experiences of success or failure make a difference for future attributions. Our findings

concerning curvilinearity can in turn complement recent studies suggesting a more complex and

nuanced understanding of self-serving attributions (Hodkins and Liebeskind, 2003; Lee and

Robinson, 2000; Lee and Tiedens, 2001; Schlenker et al., 2001; Tomlinson et al., 2004). The

curvilinear nature of the association of performance and attributions with managers' actions may

provide a new piece of the puzzle in attribution research—or at least pave the way for new

studies examining and testing such curvilinearity. Based on our findings, it seems that managers

may need to project a sense of control both to themselves and others, which requires assuming

not only credit for success but also responsibility for clear cases of failure.

Our findings also have practical implications. Practitioners should beware of the attributional

tendencies that seem to characterize M&As. In particular, there is a need to pay attention to self-

serving attributions and the resulting illusion of control that could lead to overly risky deals and

create problems in the management of the integration process. Special attention should be

focused on how managers may overemphasize the role of cultural differences and even

deliberately blame cultural differences for failure. At the same time, other causes of integration

problems might pass unnoticed and be left unaddressed. Furthermore, the “negative”

connotations of cultural differences may cause the management to overlook the potential value

embedded in cultural differences (Björkman et al., 2007; Morosini et al., 1998; Reus and

Lamont. 2009; Stahl and Voigt, 2008) or even shy away from potentially attractive acquisitions

in the presence of apparent cultural differences.

Boundary conditions and limitations

The boundary conditions of our study should be taken seriously when interpreting these findings.

Our analysis is based on a sample of Finnish companies' acquisitions made during a specific

period. Thus, our results may be influenced by the characteristics of Finnish firms and this time

period. For example, the Finnish economy has been historically driven by the pulp and paper and

metal sectors. It could be that attribution effects are more salient in these types of “traditional”

industries where Finns consider themselves to be proficient and have a national heritage. While

we tested our model for some of the peculiarities of the Finnish context (e.g., main traditional

industries) and found our results to be unaffected, it would be important to examine attributional

tendencies in other national and cultural contexts (Morris and Peng, 1994). Furthermore, it may

be that the specific time period emphasizes tendencies that could be different in other

circumstances. Thus, it would be interesting to compare attributional tendencies for example in

times of boom and bust.

Our study is based on top managers' perceptions. While it is important to examine key decision

makers' interpretations, it is possible that employees, managers of other companies, experts such

as consultants or financial analysts, or the media might manifest other tendencies. An analysis

and comparison of various groups' attributional tendencies would be a major issue for future

research. Such studies could also go further in analysis of agreement and disagreement as well as

criticality.

Our analysis is largely, but not entirely, based on survey data. Although, for example, the

national cultural difference measures were based on external data, our results may involve a risk

of common method variance. However, the fact that our tests did not indicate any such bias

should alleviate this concern. Nevertheless, it would be interesting to compare these results

against an analysis where some of the measures were operationalized differently or drawn from

other types of data.

We relied on cross-sectional, perceptual measures, and thus cannot establish causal direction per

se, which means that the risk of reverse causality must be kept in mind when interpreting our

findings. In particular, it is important to focus attention on three key issues related to the role of

cultural differences in our models. First, one could argue that managers' assessments of cultural

differences might be affected by the attributional tendencies. The fact that our models include

not only a measure of organizational cultural differences (based on the managers' own

assessments) but also national cultural differences (based on external data) should alleviate this

concern (see also the discussion about common method variance above). Second, one could raise

the question of whether the results would reflect the actual impact of cultural differences on

M&A performance; for instance, larger cultural differences would be reflected in poorer

performance and thus in attributions to cultural differences. To deal with these concerns, we

systematically controlled for the impact of cultural differences (both organizational and national)

on the attributional tendencies in all our models. Third, our cross-sectional analysis cannot per se

establish whether performance affects attributional tendencies or vice versa. In our case, the

assessments of performance could be influenced by the attributions to cultural differences. The

fact that the financial performance measure (gathered on the basis of available data) correlated

significantly and positively with the subjective assessments should at least partially alleviate this

concern. Moreover, it is usually assumed in attribution research that people first make sense of

success/failure to be able to then construct explanations (attributions). We think that this is also

likely to be the usual process in the case of our analysis, especially because the managers first

responded to questions about performance and only after that to the questions measuring

attributions. Nevertheless, the exact process of making sense of performance and attributions

may be more complicated than usually assumed; it may, for instance, be the case that managers

in “normal circumstances” frame success/failure and develop explanations for it (attributions) in

a process that involves the mutual reconstruction of both aspects of the association. Thus, we

underscore the need for future studies using other types of research designs and performance and

attributional measures to verify our propositions and elaborate on our findings.

In all, the results of our analysis should be taken seriously by researchers and practitioners alike

when making sense of performance in M&A and other contexts. While the specific features of

our sample and other limitations of our study need to be taken into consideration, our analysis

does indicate that attributional tendencies are likely to play an important role when explaining

performance, with significant theoretical, methodological, and practical implications. Our study

has provided intriguing results, but it also gives rise to a number of fascinating new questions

and issues that warrant attention in future research on attributions in the M&A and other

contexts.

ACKNOWLEDGEMENTS

Eero Vaara is the lead author of this paper; Paulina Junni and Riikka Sarala are listed in

alphabetical order; Mats Ehrnrooth and Alexei Koveshnikov are also listed in alphabetical order.

We want to thank Yaakov Weber for his insights when working on an earlier paper on the same

topic and David Miller for the language review. We also want to express our gratitude to Will

Mitchell for excellent guidance and helping to develop our initial ideas into a fully fledged

argument and our reviewers for insightful and constructive comments.

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Supporting Information

Available at http://dx.doi.org/10.1002/smj.2163

http://dx.doi.org/10.1002/smj.2163